November 5, 2005

Reviewing survey a must in any transaction

There's a general misconception in the real estate field that a land
survey for a house is not necessary as long as a purchaser gets a title
insurance policy.

The truth is that a survey is the most important document in any real
estate transaction, because without one, the purchaser cannot accurately
determine the full extent, dimensions and location of the property, whether it
is a new or a resale home.

This lesson came home to me quite vividly late last month as I
encountered three transactions within one week where nobody bothered to check a
survey. And in all three cases, the vendors selling to my purchaser clients had
deeds to the wrong house.

A real estate lawyer can practise for decades without this nightmare
happening, but it crossed my desk three times within just a few days.

Michael and Karen are hoping to buy a house on Dundas St. E. When they
came into my office, we carefully reviewed an up-to-date survey prepared one
year ago. The survey, properly called a surveyor's real property report, shows
three houses one in the middle, and one on each side lets call them L, M and
R.

The lawyer for the seller to Michael and Karen had prepared a deed to L,
the house on the left side, and that was the title I had searched. The survey
report showed it to be a house with a mutual driveway.

Sitting in my office, Michael and Karen told me that the L house was not
the one they were buying. They had purchased R, the right-side house with a
private driveway, but the title search of that one showed the property was not
owned by their vendor but by someone else who bought it a year ago.

The mixup occurred after the death in 2003 of the woman who owned both
properties, and the houses were sold by her estate trustees. Despite the fact
that a new survey was created in 2004, nobody actually bothered checking which
one was being sold to whom, and the two deeds were switched.

When the new owners of L got a deed to R instead and placed a $463,000
mortgage on it, they moved into it and substantially renovated a house they
don't own. The vendors to my clients also have a deed to the wrong house, which
they bought from the estate in 2003. Neither the purchasers of each property nor
their lawyers checked the surveyor's real property report or the subdivision
plan to verify which house they were buying.

Although title insurance if it was purchased might eventually pay for
the costs of straightening out the mess, Michael and Karen can't close the deal
until the titles are exchanged and the mortgages re-registered.

Two weeks after the scheduled closing, we're still waiting for the titles
to be switched. To say the least, my clients are not happy.

The same week, my client Brendan was buying a house on Percy St., a tiny
laneway near King St. E. and Sumach.

Since there was no survey for Brendan's property, I had to plot out the
deed description on a huge subdivision map dating from 1855. It was clear to me
when I did this that title to the house Brendan was buying was on the east side
of the street. But Brendan's house has an even number, so it had to be on the
west side of the street.

The same thing had happened in this case that happened to Michael and
Karen's house.

One person had owned both houses, and in selling the first one, the deeds
got reversed. Fortunately, everybody involved was alive and cooperative and
there was no mortgage on the house owned by the "wrong'' purchaser.

Fellow lawyer Mitchell Weisberg, who was not the lawyer who had created
the problem in the first place, managed to register correcting deeds and Brendan
got the right deed and keys on the scheduled closing date.

Had there been a proper survey, the problem might never have arisen, or
at least it could have been detected and corrected much earlier.

The third case involved a house in west central Toronto. Two
semi-detached houses were owned by the same person. The owner had obtained
permission from the City of Toronto to sever the combined title and sell each
house separately.

When the first house sold recently, the deed inadvertently contained a
description of all of one house and half of the adjacent house being purchased
by my clients. All that was left to sell to my clients was the west half of
their house, with a frontage of just over nine feet!

If anyone had bothered to check the old survey when the other house was
sold, they would have discovered that the deed transferred 1 1/2 houses.

Lawyer Graham Tobe acted for the vendor, although he had not created the
initial problem. Tobe immediately recognized what had to be done, and moved into
high gear to get the mess corrected. He arranged for the neighbours to transfer
back to his client the half-house that shouldn't have been in their deed. The
neighbour's bank also had to discharge their mortgage and re-register it on only
one house.

Through Tobe's efforts, the transaction was able to close within a week
of the scheduled date.

The lesson from these three tales is that although title insurance may
eventually pay to straighten out errors in ownership, it won't compensate for
the embarrassment in owning the wrong house, for the risk that a purchaser could
back out at the last moment if good title is lacking, or for the inconvenience
of not closing on time.

There is simply no substitute for having, and reviewing, an up-to-date
surveyor's real property report. Whoever said there was such a thing as a simple
real estate deal was wrong.

Bob Aaron is a Toronto real estate lawyer. He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.Visit the Toronto Star column archives at http://www.aaron.ca/columns for articles on this and other topics or his main webpage at www.aaron.ca.